Am I legally responsible for my in-laws' bills if I help them out?

Question

So a friend (who I have no reason to believe knows anything about law...) told me the other day that I'm s******g up big time. My in-laws have been living with my wife and I for 4-5 months or so, and we've been paying their bills for them (credit cards, cell phone, etc.), in the hopes that they'll get back on their feet soon.

My friend said that she heard that once we started paying my in-laws' bills, we run the risk of the creditors coming after us should we eventually stop and my in-laws default. Is that true? ...would creditors have legal recourse to do that?

If so, any referrals to documentation of this would greatly help me convince my wife that we need to re-think the current strategy! Thanks in advance!!!

Answer 1

Your friend is 100% WRONG.  Simply helping your in-laws pay bills does not make you responsible for those bills.  You would have to co-sign on a line (or lines) of credit in order to be responsible.  The gist I get from your post is that you did not co-sign on anything -- if that's the case, their creditors cannot legally come after you in the case of default.

Answer 2

Unless you have cosigned on their debt, you are not legally responsible for paying it.  That being said, if the creditors think that you MIGHT pay, they would have no problem harrassing you to try to get you to agree and say that you WILL pay.

As far as actually getting your in-laws out of this mess, here is a plan .  This plan works with any number of debts and with any age of person or couple BUT it only works if you actually work the plan:

1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut you spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :

Debt #1 (highest interest): minimum payment+ extra payment

Debt #2 (middle interest): minimum payment

Debt #3(lowest interest): minimum payment

Debt #1: paid off

Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment

Debt #3: minimum payment

Debt #1: paid off

Debt #2: paid off

Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. You employer probably matches at least part of your contribution so why give up free money. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

Answer 3

No, as long as you are not coborrowers or cosigners for their loans.  Any money you give them or bills you pay for them is gift money.  I personally would not pay their bills directly.  If you want to give them the money and let them pay, that's your call.

Answer 4

If you send checks with your names and financial institution on them, they can and will come back at you.

I found this out the hard way.  My husband and I got together 9 years ago.  He put his money in my bank account cuz his ex was stealing from his (she couldn't, but did).  I was writing his car payments and his credit card bill.  Come to find out, it was on MY credit!  It didn't matter, as we got married a short time later....just saying.

If you pay their bills, use a money order or cashier's check.

By the way, they should be paying their own bills, not you.  I don't care for my parents, but I have helped my children out.  If they need money, I give it to them and make them write the checks.  No red tape there!